Friday, May 14, 2010

Fair Warning: Markets about to turn down significantly!

The stock market may make another drop down today as I look at the Futures market. If it closes down on the Dow between 100 and 200 points, it will set the downtrend line as is shown in the Dow chart. This could be the turn down which accelerates and causes panic in the days and weeks ahead.

Savvy readers of this Blog used the opportunity yesterday morning or Wednesday to load up more on the TZA Calls for October 16th expiration for Strike prices of either $9.00 or $10.00/share, as they are in perfect position to rise significantly again. The second chart is of the Russell 2000 Index, symbol $RUT. You will notice from the 3 month chart that the Russell dropped over 12% in that recent dip. This has huge implications for the ETF's of this Index.

Remember TZA is an Ultra Short ETF of the Russell Index. It moves up, when the Russell Index is down and down when the Russell goes up. It moves double the move of its counterpart, TNA. So, if TNA moves down 1%, look for TZA to move up 2%. In recent market action TNA have been moving down 4%-5% causing TZA to move up 8-10%. Then if you have Call Options on TZA, as I do, these moves up can be as much as 100-200%.

I have warned many of my belief that we are headed down in all markets by a scary amount. I dare repeat that again, for having many dismiss this. Enough to say, many will be really scared when the market drops, because the bottom will seem to never come. Why not be prepared for this by taking your profits and sleeping better at night. Gold is flashing warning signs daily, as it hits new highs, even today, as it is at $1247/ounce, up another $11.00 an ounce today.

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